Project Auckland: New golden age in sight for region's economy

Auckland's CBD is disproportionately more productive than the rest of the country. Photo / NZME.

Auckland has recently joined a select group of world cities with a knowledge and service-based economy generating the wealth and living standards on which respective nations depend.

However, little noticed or debated by Auckland Council is that the city continues to fall well short of achieving its Auckland Plan and Economic Development Strategy (EDS) targets. Why? Are the targets considered irrelevant to what's happening in the economy, or too high? What's holding Auckland back?

Set in 2012, the targets include increasing annual GDP growth from an average 3 per cent per year in the previous decade to 5 per cent per year for the next 30 years. The strategy sets a goal of "growing skills and the local workforce".

Yet October's Auckland Economic Quarterly (AWQ) report indicates Auckland's GDP growth in the previous year was 2.4 per cent against the rest of New Zealand's 2.9 per cent. And Auckland's unemployment rate sits at 6.2 per cent compared to 5 per cent for the rest of New Zealand.

There is also a target to increase annual average productivity growth from the 1 per cent a year achieved in the previous decade to 2 per cent a year for the next 30 years.

In Auckland, patchy progress is apparent. Against the New Zealand average annual productivity increase of 1.1 per cent per year, Auckland's overall rating is estimated at about 1.4 per cent, though the CBD's is at least twice that of the rest of New Zealand at more than 2 per cent.

So why is the CBD doing so well? What lessons can we learn that might help unlock and spread the new golden age for Auckland heralded by this success?

According to economists, Auckland's CBD is disproportionately more productive than the rest of the country because of "agglomeration effects". That is, the concentration of firms and workers in one place increases the thickness of the labour market and effectiveness of connections between firms and workers, making them and the economy more productive.

Auckland's future prosperity depends on its labour market - the firms and skills inherent in it, the pipeline of new skills from the education and migration systems, and the nature of jobs it both demands and creates. Businesses and jobs need to be highly accessible, which in turn has important implications for how Auckland's transport system and property development strategy is developed and allowed to operate.

The larger and more concentrated our labour market becomes, the more innovative and productive Auckland will become and the more successful New Zealand will be.

Auckland is consistently ranked in the top 10 cities with a high quality of life but is a work in progress on accessibility, ranked between 40 and 60 for infrastructure performance.

To make sure our city is attractive and accessible enough to attract firms and knowledge workers, our transport and other critical issues holding Auckland back must be fixed. If this were to happen, the EDS real GDP target of 5 per cent annual growth could be very achievable.

As well as a knowledge and service-based city centre economy, a second characteristic Auckland shares with other fast-growing international cities is the growth in outer urban areas of wholesaling, warehousing, assembly, transport logistics, ICT and other smart manufacturing firms and workers geared to develop and distribute goods and service "hardware".

The Auckland Plan anticipates around 70,000 new jobs to be created in suburbs south of the CBD, including Southdown, Penrose, East Tamaki, Auckland Airport, Wiri, Takinini and Pukekohe by 2041, compared to the 140,000 projected for the city centre.

A draft 10-point high-level action plan is being developed to support business and employment growth in these areas. It aims to:

• Address the shortage of industrial land.

• Improve transport access.

• Develop partnerships with the business community and education providers.

• Better align land and infrastructure planning to support growth.

To get faster momentum on both the city centre and industrial area growth initiatives, and help Auckland move into the second phase of economic development, Auckland Council has recently proposed creating a new development Council Controlled Organisation (COO) by merging Waterfront Auckland and Auckland Council Properties. The role of the new CCO in the transformation of the city's economy may become clearer when the proposal goes out for consultation in the draft Long-Term Plan 2015-25.

Equally critical will be what is in the draft Long-Term Plan to get action on the agenda created in association with Greg Clark, the London-based OECD guru on world cities.

Clark has identified that moving Auckland successfully into the second phase of economic development requires, critically, a reorganisation to make the Council more business-friendly and open.

He says the high-level action required to become branded an international business-friendly city of scale is for the Auckland Council to seek out a better understanding of the real needs of business, and use this to inform policy development, implementation and monitoring across the whole council organisation.

This ideal is also set out as an action in the EDS, but continues to be a work in progress

Tony Garnier is an Auckland-based business commentator and consultant.